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401k plan provider change
05-26-2011, 08:56 AM
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#1
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Confused about dryer sheets
Join Date: Jan 2011
Location: Mount Dora
Posts: 2
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401k plan provider change
This is my first posting. I have been reading for a while and there are a lot of informed folks here so I am hoping you can help in a decision I have to make.
I am on a 401k plan provider selection committee at my work. We are not happy with the current provider and have it narrowed down to two:
1. Fidelity =
a. Average 1% TOTAL fees
b. We are able to select up to 15 funds from all the Fidelity family (including ETF's) we can also select outside funds but this would more than likely result in a higher fee. Fidelity has a lot of great funds so we may not need to consider this.
c. Each employee would be responsible for their own fund selection and allocation within the 15 funds selected by the committee.
d. Minimum one on one advice on a quarterly basis for each employee as needed.
1. Wells Fargo =
a. Fee is 1% plus the fund charge itself. All funds are at the institutional no load amounts and no additional trading cost with no limits on the amount of buy/sell transactions.
b. Personal advisor would be an "Active Manger" of your account on a weekly/monthly basis. The larger your individual account amount the more active that advisor becomes on buy/sell recommendations. He is working on a straight 1% fee o the more he makes you and the less your losses on the down side the more he makes.
c. They include a full blown personal plan to establish life goals, risk tolerance, allocations, wills, insurances, etc
I always have been a long term investor so I am attracted to the 1% total from Fidelity but Wells Fargo made a really good presentation as to what they can offer with the active management of your account and the complete personal planning they provide.
Any thought and recommendations would be really helpful. Its a big decision and I want to make the right one.
__________________
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~Author : Benjamin Franklin
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05-26-2011, 10:47 AM
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#2
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Recycles dryer sheets
Join Date: Jan 2011
Location: Desert SW
Posts: 358
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So it seems to be a question of the value that Well's would bring to the employee group for an extra 1%. For me (and I suspect many on this forum), I always want the low fee options and would be highly frustrated to have to pay perhaps 2% or more on some of the fund choices.
I beleive that it is the employer's fiduciary duty to bring the employee the best 401k option at the lowest cost, while it isn't necessarily the employers duty to set up employees with a personal advisor and personal plannng. From both a cost and a liability standpoint, I would favor the Fidelity plan. That is probably why they are the biggest (or close to it) 401k provider.
Welcome to the forum.
__________________
Retired in 2011 at 54
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05-26-2011, 11:05 AM
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#3
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Recycles dryer sheets
Join Date: May 2010
Location: SW Ohio
Posts: 360
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I would go with Fidelity.
Can you elaborate on the cost relative to the number of people in the plan? i.e. one annual fee and you can have 1-200 people in the plan.
Does the company cost for the plan depend on the number of people in the plan?
The reason I ask, some companies have a waiting period (6 months) before you can sign up for the 401K plan. The reason they always say is because of the expense. I would think from Fidelity's view the more the merrier.
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05-26-2011, 11:29 AM
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#4
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Full time employment: Posting here.
Join Date: Oct 2006
Posts: 783
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A large % of the $ in our company's 401K is in MM and will likely stay there, I bet those people would prefer the lowest cost option and have no desire to pay extra for active management.
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05-26-2011, 12:40 PM
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#5
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Confused about dryer sheets
Join Date: Jan 2011
Location: Mount Dora
Posts: 2
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Our current plan has 20 employees participating and a total value just under $3mm. The average employee age in the plan is 45 so it is going to continue to grow in value.
What I did not mention is that there is an annual plan administration fee that the company must pay of around $2500.00 and this is about the same for both Fidelity and Wells Fargo.
Thank you for your reply.
__________________
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"Fish and visitors smell in three days"
~Author : Benjamin Franklin
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05-26-2011, 01:20 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,241
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I was the committee at our work...
We went with Fidelity... I am very surprised they have only offered 15 funds as we were offered to pick from a list of over 300... and I picked about 85...
My picks were so everybody could invest they way they want... we have a group of target funds, we have a group of low cost index funds, we have a group of managed funds, we have international, we have commodities, we have bonds, we have MM... you can slice and dice any way you want...
We do pay a fee for the service and also pay the annual fee for current employees. Ex-empolyees have to pay their own annual fee which I believe is in the $20 range.... maybe a bit more.
They seem to do a pretty good job... even though we still have to do a lot on our own, they do have account managers to help out and to remind you when things need to be done...
I can tell you that for a small firm we were not able to find anybody that came close to them that wanted our business (most companies did not respond to our request)... we currently have about $1.3 mill with 30 or so accounts...
Edit to add... I would not want someone recommending to the employees how to invest their money when they got a piece of the earnings.... they might not take the true risk reward ratio into account if they earn more if you earn more.... MM accounts would be off the investment world and you say most is in MM now... (I would move it out of there myself, but would not try and tell someone else not to keep it there if they liked that investment)....
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05-26-2011, 01:24 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2007
Posts: 14,328
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Fidelity
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05-26-2011, 01:35 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Fido is a no-brainer compared to Wells Fargo............
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Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
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05-26-2011, 02:48 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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I love WellsFargo for personal investments and banking, but ....
I was also on the 401(k) committee. We went with Fidelity. One does not want too many funds in the pile as this confuses folks, so 15 is about right if some of them are Target Retirement funds. In fact, the Fidelity folks may want to put more funds in there in order to confuse folks and drive them towards their Freedom funds.
I made sure that we had the Fidelity index funds in our 401(k). That means Fidelity Spartan S&P500, Fidelity Spartan Extended Market, Fidelity Spartan Bond Index, Fidelity Spartan International and Fidelity Four-in-One fund. These funds have expense ratios between 0.1% and 0.22%, so are the way to go with Fidelity. The Fidelity reps and CFAs who help you may balk at these options, but if your firm insists, they will put them in.
Besides the $2500, Fidelity may charge a per participant fee of $20 to $30 which is negotiable. They may spring it on you at the contract signing stage and say, "We will deduct $20 from a participant's account annually, $5 a quarter." Since the firm was not paying it, they felt they did not need to mention it until signing. Watch out for that and have the firm pay any per-person fee. For someone with only $2000 in the plan, a $20 fee is like 1% additional per year.
A great web site on all this is found here with step-by-step instructions:
Setting up a 401k plan - Bogleheads
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05-26-2011, 03:06 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Definitely go with Fido. Our 403b/401a plan has a couple of the Spartan funds, their target funds as well as Vanguards Total Bond Index. I wouldn't use anything to do with Wells Fargo based on a past bad experience...
DD
__________________
At 54% of FIRE target
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05-26-2011, 04:12 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,241
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Also, the Fidelity account that we had gave us a LOT of options to pick funds that are NOT Fidos... but they did insist on all the Freedom funds...
As an FYI, none of them were Vanguard as they do not pay for someone else to invest in their funds...
Here is an example of the moderate balanced funds we could choose from:
Janus Adviser Balanced Fund - Class S Manning & Napier Fund, Inc. Pro-Blend Extended Term Series - Class S SharesManning & Napier Fund, Inc. Pro-Blend Moderate Term Series - Class S SharesThe Oakmark Equity and Income Fund - Class I American Beacon Balanced Fund - Investor Class Columbia Balanced Fund - Class Z Fidelity Balanced Fund Morgan Stanley Institutional Fund Trust Balanced Portfolio - Class P Shares Van Kampen Equity and Income Fund - Class A Fidelity Asset ManagerŽ 50% Fidelity PuritanŽ Fund Pax World Balanced Fund - Individual Investor Calvert Social Investment Fund Balanced Portfolio - Class A Fidelity Asset ManagerŽ 70% USAA Cornerstone Strategy Fund AIM Basic Balanced - Investor Class AIM Basic Balanced Fund - Class A Fidelity Asset ManagerŽ 60% Fidelity Dynamic StrategiesSM Fund
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05-26-2011, 04:32 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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^ Why would a 401(k) need more than one balanced fund? I can easily imagine someone who would be so totally confused having to choose from among all those balanced funds. Why make it harder on them than it has to be?
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